Published on 20-May-2011
Validated on 01 Aug 2013
"SAP applications have transformed the scalability of the Kinh Do Corporation, and the IBM Power platform is the right strategic platform to help us meet our business objectives. " - Nguyen Xuan Luan, Corporate VP and Chief Information Officer, Kinh Do Corporation
Kinh Do Corporation
BA - Business Intelligence, Enterprise Resource Planning, Information Infrastructure, Information Integration, Infrastructure Simplification, Optimizing IT, Optimizing IT
IBM Business Partner:
Kinh Do Corporation, of Ho Chi Minh City in Vietnam, is well on the way to becoming Vietnam’s largest food conglomerate, with associated businesses in retail, property and investment. Founded in 1993, sales are growing by around 30-40 percent annually. In 2010, Kinh Do Corporation employs 8,000 people, with VND 3.5 trillion legal capital and revenues of VND 3.5 trillion ($170 million).
To support its existing Solomon business management and accounting software, Kinh Do Corporation relied on spreadsheet-based reporting, which lacked process control and was prone to error. In some cases, reports could not be generated at all as data was locked in separate systems. Inventory reports, for example, were slow to produce, risking production halts if materials were not available, and consolidated month-end financial reports took many days to generate and required significant manual effort. Executives lacked enterprise-wide information on sales trends to support decisions.
Implemented SAP ERP solutions including financials, controlling, materials management, sales and distribution, production planning with SAP ERP Human Capital Management, SAP NetWeaver Business Warehouse and SAP BusinessObjects. Centralized to IBM Power servers, initially Power 550 and later a planned transition to Power 750 with POWER7 processors.
Introduced fast, accurate month-end reporting, reduced stock-out incidence and improved manufacturing efficiency. Enterprise reporting allows executives to drill down to examine what is profitable from company level right down to individual SKU, helping to understand market opportunities and drive profitability.
Kinh Do Corporation, of Ho Chi Minh City in Vietnam, is well on the way to becoming Vietnam’s largest food conglomerate, with associated businesses in retail, property and investment. Founded in 1993, sales are growing by around 30-40 percent annually, and in 2010, Kinh Do Corporation employs 8,000 people, with VND 3.5 trillion legal capital and revenues of VND 3.5 trillion ($170 million).
Starting as a small factory with 70 staff and workers and VND 1.4 billion investment, the Kinh Do group has grown to include more than ten separate companies.
Nguyen Xuan Luan, Corporate VP and Chief Information Officer, comments, “When we were a young and small business, everything could be controlled easily. There were relatively few transactions and we could simply remember all the key data. Now, ten companies with different activities present a more difficult challenge. The food division alone is too big to control without a strategic approach to information management.
“Executives were constantly requesting reports from us, which required manual effort to produce. Often the reports, delivered as spreadsheets, contained inaccuracies and were late in delivery. In some cases we could not create the reports at all because the data was simply not available or was locked up in separate systems. The result was that executives did not have the kind of cross-enterprise information they wanted to support their decisions.
“The classic example is the end-of-month profit and loss, a simple task for one company to produce on one master spreadsheet. However, a manual, spreadsheet-based approach does not work for multiple operational units with multiple inventory positions.
“On the operational side, poor inventory management of ingredients as well as poor planning tools could lead to halts in production – even through something simple such as forgetting to order the supplies. Spreadsheets contain no process control, with no way to catch mistakes and no mechanism or process for informing management of the business situation.”
Selecting SAP applications
The Kinh Do team was clear that an integrated business management solution was the right path, and narrowed down the potential suppliers to two, one of which was SAP.
“For each ERP vendor, we analyzed the cost of acquisition, the cost of implementation, the cost of operation and, most importantly, the integration of the modules and the ability to expand the solution to new business divisions in future. We decided to switch to SAP ERP,” says Nguyen Xuan Luan.
“We felt that SAP ERP software offered the best fit for Kinh Do, with examples of similar businesses in the region achieving success based on SAP solutions. We also knew that SAP has a good implementation record in Vietnam, and has a reputation for investing in training its partners to deliver excellent service.
“While the vendors’ solutions were functionally equivalent in many ways, SAP offered better integration across all its components. We understood that SAP has developed its own solutions in house and generally not acquired third-party solutions, and the result is an ERP solution that functions as an integrated whole, a very important factor for Kinh Do.”
Kinh Do implemented a complete package of SAP ERP software, including financials, controlling, materials management, sales and distribution, production planning with SAP ERP Human Capital Management, SAP NetWeaver Business Warehouse and SAP BusinessObjects for business analysis.
The SAP software replaced a number of independent solutions, and the Kinh Do team chose to create an all-new environment on centralized systems, selecting IBM Power 550 servers.
“Kinh Do selected IBM Power Systems servers because we wanted a reliable and stable environment for these mission-critical SAP applications,” says Nguyen Xuan Luan. “We chose IBM because we know that IBM develops and remains committed to its technology strategies for the POWER platform, whereas many other vendors seem to change their processor or development direction. Feedback from other businesses in Vietnam using the IBM Power platform is good, and IBM has a strong Vietnamese support organization.
“Further, the IBM Global Technology Services team provided excellent implementation services, and was willing to give advice on sizing to ensure that we did not over-buy capacity. IBM Global Technology Services provided expertise and technical skills for the period we needed, and executed the project efficiently and effectively.”
Kinh Do runs its SAP applications in virtual servers on the Power 550 using logical partitions (LPARs). Each LPAR is sized to provide optimal processor and memory for each application, with dynamic allocation of resources to ensure that service delivery is maintained during times of high workload. For example, the SAP applications share a total of 64 GB of main memory, a larger or smaller proportion of which is made available to the production LPAR during the working day.
“Virtualization on POWER is very impressive, enabling Kinh Do to maximize performance without the need to over-buy capacity,” explains Nguyen Xuan Luan. “The business requires 24-hour operations, and we keep our systems running by using LPARs, too. For example, normally we would need two or three days’ downtime for an upgrade or update to a working application. With LPARs, we create the upgraded or updated instance in a new LPAR and redirect users, and experience no downtime at all.”
Enjoying the business benefits
Operational transactions for all Kinh Do business units are now processed through SAP software, stored in SAP NetWeaver Business Warehouse, and analyzed with SAP BusinessObjects.
“With SAP ERP software, Kinh Do has a single operational platform across the business, which captures and generates accurate data for reporting and planning purposes. Most importantly, the integrated nature of SAP software means that it also contains the essential workflow processes and automation, helping us avoid errors such as lack of ingredients. Where an order is placed that would require more inventory than we have on site, the solution automatically highlights the issue and creates a supplier order ready for authorization.
“The business result is that with SAP solutions Kinh Do is able to do more business with the same number of people; the IT department has not had to grow, even though the company continues to expand rapidly.”
Kinh Do manages its business key performance indicators with SAP BusinessObjects. Data in the SAP NetWeaver Business Warehouse is examined for trends, errors and exceptions, both as standard reports and ad-hoc queries requested by executives.
“With the spreadsheet-based system, we looked at sales volumes by month, and that was the best we could do,” explains Nguyen Xuan Luan. “With SAP BusinessObjects running on the IBM POWER platform, we can look at trends every day, and ask ourselves, ‘does this fit with the forecasts, does it fit with our production capacity?’ We examine trends by SKU, sales area, product category and more, and discover trends, errors and outliers, and start to understand exactly what is actually happening. For example, does an abnormal sales report highlight a data error or does it show us a new market development that we could exploit?
“Previously, we could look at historic profit at the operational unit level only. Now, we can analyze which SKU makes money, with respect to whatever measure we choose, from division right down to the product level. SAP allows us to define cost centers, assign raw materials, production costs, and even the worker hours for each SKU so cost of each SKU is calculated much more accurately. Data like this shows us what we need to do to improve.
“The IBM Power servers play a critical role in ensuring that the SAP applications are always available. The IBM virtualization technologies enable Kinh Do to optimize the technical performance for each business area, ensuring that reports are generated rapidly and reliably without impacting general production response.”
Looking to the future
Kinh Do is in the process of implementing SAP Advance Planning and Optimization, and at the group level is deploying SAP Budget Control System, SAP Business Planning and Consolidation, and Treasury Management. The extended applications will be deployed on an IBM Power 750, featuring the IBM POWER7 processors, and existing SAP solutions will be migrated to the new server.
Nguyen Xuan Luan concludes, “SAP applications have transformed the scalability of the Kinh Do Corporation, and the IBM Power platform is the right strategic platform to help us meet our business objectives.”
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